3. Capital and financial risk management

3. Capital and financial risk management

This section sets out the policies and procedures applied to manage the capital structure and the financial risks that are exposed to. The total capital is defined as equity and net debt. GF manages its capital structure in order to maximize shareholdersʼ return, maintain optimal cost of capital and provide flexibility for strategic investments. 

3.1 Interest-bearing financial liabilities and pledged or assigned assets

3. Capital and financial risk management

This section sets out the policies and procedures applied to manage the capital structure and the financial risks that are exposed to. The total capital is defined as equity and net debt. GF manages its capital structure in order to maximize shareholdersʼ return, maintain optimal cost of capital and provide flexibility for strategic investments. 

3.1 Interest-bearing financial liabilities and pledged or assigned assets

3.1.1 Interest-bearing financial liabilities

Interest-bearing financial liabilities consist of the following items:

CHF million

 

Within 1 year

 

Up to 5 years

 

Maturity over 5 years

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

Bonds (at fixed interest rates)

 

150

 

149

 

225

 

524

 

523

Other financial liabilities (at fixed interest rates) 1

 

31

 

91

 

14

 

136

 

107

Other financial liabilities (at variable interest rates)

 

116

 

6

 

6

 

128

 

134

Loans from pension fund institutions

 

28

 

 

 

 

 

28

 

29

Total

 

325

 

246

 

245

 

816

 

793

1 This category comprises other financial liabilities with a fixed interest period of more than three months.

Net debt, which is calculated as the difference between interest-bearing liabilities and  cash and cash equivalents and marketable securities, decreased by CHF 31 million to CHF 183 million in the year under review (previous year: CHF 214 million). The reason for this decrease is primarily the high free cash flow, in the amount of CHF 130 million. This was offset by the dividend payment to GF shareholders and minority shareholders amounting to CHF 89 million (previous year: CHF 89 million).

In order to secure non-current liabilities, assets valued at CHF 28 million (previous year: CHF 16 million) were pledged or ­assigned as collateral. These assets consisted of property, valued at CHF 5 million (previous year: CHF 2 million) and buildings valued at CHF 23 million (previous year: CHF 14 million).

The following table shows in detail the various categories of other financial liabilities by currency and interest rate:

CHF million

 

Issuing currency

 

Range interest rate %

 

2017

 

Issuing currency

 

Range interest rate %

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Bonds (at fixed interest rates)

 

 

 

 

 

524

 

 

 

 

 

523

 

 

 

 

 

 

 

 

 

 

 

 

 

Bond (Georg Fischer Finanz AG) 1 1/2% 2013-2018 (12 September) Nominal value: CHF 150 million

 

CHF

 

1.6

 

150

 

CHF

 

1.6

 

150

Bond (Georg Fischer Finanz AG) 2 1/2% 2013-2022 (12 September) Nominal value: CHF 150 million

 

CHF

 

2.6

 

149

 

CHF

 

2.6

 

149

Bond (Georg Fischer Finanz AG) 7/8% 2016-2026 (12 May) Nominal value: CHF 225 million

 

CHF

 

0.9

 

225

 

CHF

 

0.9

 

224

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities (at fixed interest rates) 1

 

 

 

 

 

136

 

 

 

 

 

107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHF

 

1.1–1.5

 

21

 

CHF

 

1.1–3.5

 

22

 

 

EUR

 

2.5–5.0

 

72

 

EUR

 

2.5–5.0

 

64

 

 

CNY

 

6.1–7.6

 

11

 

CNY

 

6.1–7.6

 

13

 

 

Other

 

5.0–13.3

 

32

 

Other

 

4.3–13.3

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities (at variable interest rates)

 

 

 

 

 

128

 

 

 

 

 

134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR

 

1.0–2.0

 

28

 

EUR

 

1.0–2.0

 

32

 

 

CNY

 

3.9–4.6

 

70

 

CNY

 

3.9–5.3

 

74

 

 

TRY

 

13.5–13.9

 

8

 

TRY

 

12.6–14.5

 

23

 

 

Other

 

0.0–4.6

 

22

 

Other

 

0.0–9.3

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans from pension fund institutions

 

 

 

 

 

28

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR

 

6.0

 

26

 

EUR

 

6.0

 

25

 

 

CHF

 

1.0

 

2

 

CHF

 

2.0

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

816

 

 

 

 

 

793

1 This category comprises other financial liabilities with a fixed interest period of more than three months.

GF has the following syndicated loan:

Debtors

 

Term

 

Credit

 

Thereof utilized

Georg Fischer Ltd/Georg Fischer Finanz AG

 

2015–2020

 

CHF 250 million

 

CHF 0 million

The syndicated loan gives GF the necessary financial security to be able to act swiftly in the event it wishes to make acquisitions. This line of credit was not drawn on in the year under review. In addition to other terms, the loan is subject to covenants with respect to the net debt ratio (ratio of net debt to EBITDA), the interest-coverage ratio (ratio of EBITDA to net interest expense), and the equity ratio (ratio of equity to total assets). The loan has additional terms such as are usual for a syndicated loan.

The bonds placed on the market as well as the syndicated loan are subject to the usual cross-default clauses, whereby the outstanding amounts may all become due if early repayment of another loan is demanded of the company or one of its main Corporate Companies owing to a failure to meet the credit terms. As of the balance sheet date, the effective credit terms had been met.

The interest-bearing financial liabilities also include loans payable to employee benefit plans in the amount of CHF 28 million (previous year: CHF 29 million).

Accounting principles

Financial liabilities comprise bank loans, mortgages, and bonds. They are recognized at their amortized cost. Borrowing costs are recognized in the income statement using the effective interest method. Borrowing costs that can be allocated directly to the construction, build-up, or purchase of a qualifying asset are capitalized as part of the acquisition or manufacturing costs of the asset.

3.1.2 Pledged or assigned assets

Assets pledged or restricted on title in part or whole amount to CHF 36 million (previous year: CHF 20 million). In the year under review, CHF 28 million (previous year: CHF 16 million) relate to land and buildings. The increase of CHF 12 million mainly results from Urecon Ltd acquired by the GF Piping Systems division.

CHF 3 million relate to machinery and equipment (previous year: CHF 0 million). These are mainly attributable to Eucasting Ro SRL acquired by the GF Automotive division.

CHF 5 million relate to accounts receivable (previous year: CHF 4 million). There are no pledged or assigned inventories.

The assets are pledged or restricted on title as collateral for bank loans.

3.2 Financial result

3.2 Financial result

CHF million

 

2017

 

2016

 

 

 

 

 

Interest income

 

2

 

2

Financial income

 

2

 

2

 

 

 

 

 

Interest expenses

 

28

 

30

Net losses on financial instruments at market value recognized in income statement

 

3

 

1

Other financial expenses

 

2

 

2

Financial expenses

 

33

 

33

3.3 Leasing

3.3 Leasing

CHF million

 

2017

 

2016

 

 

 

 

 

Leasing obligations up to 1 year

 

18

 

16

Leasing obligations 1 to 5 years

 

42

 

37

Leasing obligations over 5 years

 

10

 

11

Operating leases (nominal values)

 

70

 

64

Liabilities relating to financial lease contracts in the amount of CHF 8 million (previous year: CHF 9 million) are mainly due to the leasing of the machines by GF Piping Systems and GF Automotive. The leasing obligations are included in “Other financial liabilities at fixed interest rates” and are disclosed in note 3.1 (3.1.1 Interest-bearing financial liabilities).

Accounting principles

The present value of finance leases is recognized in the non-current assets and in the other financial liabilities on the balance sheet when most of the contractual risks and rewards have been transferred to the consolidated entity. Lease installments are divided into an interest and a repayment component based on the annuity method. Assets held under such finance leases are depreciated over the shorter of their estimated useful life and lease term. Operating lease installments are reported in the income statement under operating expenses.

3.4 Share capital/capital management

3.4 Share capital/capital management

Share capital

As of 31 December 2017, the share capital comprised 4ʼ100ʼ898 registered shares with a par value of CHF 1 each. Total dividend-bearing nominal capital amounted to CHF 4ʼ100ʼ898.

Capital management

The capital managed by the Corporation consists of the consolidated equity. The ratios are shown in the following table:

CHF million

 

2017

 

2016

 

 

 

 

 

Equity attributable to shareholders of Georg Fischer Ltd

 

1’317

 

1’156

Non-controlling interests

 

52

 

44

Equity

 

1’369

 

1’200

 

 

 

 

 

Total assets

 

3’610

 

3’202

Equity ratio as %

 

37.9

 

37.5

 

 

 

 

 

Theoretical equity incl. net value of goodwill

 

1’467

 

1’270

Theoretical equity ratio incl. net value of goodwill as %, total assets incl. goodwill

 

39.6

 

38.8

 

 

 

 

 

Average reported equity

 

1’284

 

1’165

Net profit

 

258

 

225

Return on average reported equity as %

 

20.1

 

19.3

The Corporation has set the following goals for the management of its capital:

  • maintain a healthy and sound balance sheet structure based on going concern values
  • ensure the necessary financial scope in order to make investments and acquisitions in the future
  • realize a return for investors commensurate with the risk

The Corporation uses two ratios to monitor equity: the equity ratio and the return on equity. The equity ratio represents equity as a percentage of total assets. Return on equity is net profit expressed as a percentage of average equity. These ratios are reported to the Executive Committee and the Board of Directors at regular intervals through the internal financial reporting. Both, total equity and the balance sheet total, increased significantly, resulting in a slightly increased equity ratio of 38% as of 31 December 2017.

As an industrial group, GF strives to maintain a strong balance sheet with a high portion of equity. In the medium term, the Corporation aims to achieve an equity ratio of 35% to 40%. The medium-term target for return on equity is above 15%.

The Corporation does not have any financial covenants with minimal capital requirements. There is one financial covenant concerning the equity ratio.

The Board of Directors presents a proposal for the appropriation of retained earnings to the Annual Shareholders’ Meeting. GF pursues a results-oriented dividend policy and usually distributes about 30% to 40% of the Corporation’s consolidated net profit to shareholders. The payment is distributed out of the retained earnings. The Board of Directors is proposing to the Annual Shareholders’ Meeting a dividend payment out of the retained earnings of CHF 23 in total per registered share for the fiscal year 2017 (previous year: CHF 20 in total per registered share). As of 31 December 2017, the par value of the Georg Fischer registered share amounts to CHF 1.

The authorized capital and the conditional capital consists of a maximum of 600ʼ000 shares. The maximum amount of the authorized or conditional capital is reduced by the amount that authorized or conditional capital is created through the issue of bonds or similar debt instruments or new shares.

By no later than 22 March 2018, the maximum authorized share capital will be CHF 600ʼ000 divided into no more than 600ʼ000 registered shares each with a par value of CHF 1.

The reserves which are not disposable respectively distributable amount to CHF 84 million as of 31 December 2017 (previous year: CHF 85 million).

3.5 Treasury shares

3.5 Treasury shares

 

 

 

 

 

 

2017

 

 

 

 

 

2016

 

 

Quantity

 

Transaction price (Ø) in CHF

 

Purchase cost (Ø) in CHF million

 

Quantity

 

Transaction price (Ø) in CHF

 

Purchase cost (Ø) in CHF million

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December

 

6’984

 

1’114.63

 

8

 

12’338

 

834.00

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

19’020

 

967.68

 

18

 

20’467

 

820.60

 

17

Disposals

 

–16’959

 

908.08

 

–15

 

–6’785

 

811.92

 

–6

Transfers (share-based compensation)

 

–7’415

 

920.16

 

–7

 

–9’979

 

705.24

 

–7

Changes in share price

 

 

 

 

 

2

 

 

 

 

 

 

As of 1 January

 

12’338

 

834.00

 

10

 

8’635

 

652.63

 

6

As of year-end 2017, GF held 6ʼ984 treasury shares (previous year: 12ʼ338 registered shares) with a par value of CHF 1. In the year under review, 19ʼ020 treasury shares were purchased on the stock market at an average transaction price of CHF 967.68, and 16ʼ959 treasury shares were sold on the stock market at an average transaction price of CHF 908.08.

According to the compensation model for the Board of Directors, members receive a fixed number of Georg Fischer registered shares. In accordance with the long-term incentive plan, members of the Executive Committee are entitled to a number of Georg Fischer performance shares (PS). The vesting of the performance shares (PS) is based on assumptions of Earnings per Share (EPS) and relative Total Shareholder Return (rTSR) – values over prospective three years. Based on a plan defined by the Board of Directors, a fixed number of Georg Fischer registered shares are granted to members of the Senior Management as long-term financial incentive see Compensation Report.

9ʼ284 registered shares are estimated to be required for share based compensation of Executive Committee and members of the Senior Management.

The allocation for the share-based compensation is based on the relevant plan regulations. The share-based compensation for members of the Board of Directors, for the Executive Committee as well as the registered shares for the members of the Senior Management are stated at fair value and recognized as an expense at the allocation date. Such compensation is recorded under “Operating expenses” see note 1.3 (1.3.1 Operating expenses) for the Board of Directors and under “Personnel expenses” see note 1.3 (1.3.2 Personnel expenses) for the Executive Committee and the Senior Management. The total expense for the share-based compensation plans is CHF 11 million (previous year: CHF 8 million).

Accounting principles

Treasury shares are stated at cost as a separate negative position in equity. Gains or losses arising from the disposal of treasury shares are respectively credited to or deducted from the corresponding capital reserves.

3.6 Risk management

3.6 Risk management

Enterprise risk management as a fully integrated risk management process was systematically applied in 2017 at all levels of the Corporation. The three divisions, the Corporate Staff and all significant Corporate Companies prepared a risk map in May and November of the key risks with regard to strategy, markets, operations, management and resources, financials as well as sustainability. The likelihood of the risk occurring was classified into four categories. Where possible and appropriate, the identified risks were subject to a quantifiable assessment, taking into consideration any measures that have already been implemented. Alternatively, a qualitative assessment of the risk exposure was applied.

The Risk Council, consisting of representatives of the divisions and the Corporate Staff and headed by the Chief Risk Officer, held two meetings. The topics of these meetings were the optimization of the risk reporting of compliance risks, the findings of a benchmark analysis regarding the enterprise risk management and business continuity management processes as well as the analysis of the risk maps.

In accordance with the semi-annual risk reporting process, the Executive Committee and the management of the divisions discussed the risk maps twice during the year under review. They defined at the appropriate level the key risks of the Corporation, the divisions and the Corporate Companies, and determined adequate measures to mitigate those risks. The Board of Directors tabled the topic of enterprise risk management in December 2017 to analyze the corporate and divisional risk maps as well as to define the key risks and the risk mitigation measures.

The multi-stage procedure, including workshops at division management, Executive Committee and Board of Directors level, has proven to be very effective, as has having Internal Audit assess the risk maps prepared by the Corporate Companies.

Similar to the previous year, the key risks were identified as political and economic risks in China and the overcapacity of certain business units in Europe. Measures to reduce these and other risks were defined and are being implemented in line with the strategic targets of the Corporation and the three divisions.

Financial risk management

Financial risks overview

 

Risk source

 

Risk management

 

 

 

 

 

a) Credit risk

 

default of a counterparty: from trade accounts receivable or from bank deposits

 

diversification and credit assessments

b) Market risk

 

 

 

 

– Currency risk

 

sales and purchases as well as financing Corporate Companies in foreign currencies

 

selling and producing in functional currency (“congruency” rule) and hedging by means of forward exchange contracts

– Interest rate risk

 

unsignificant

 

not necessary

– Price risk

 

unsignificant

 

not necessary

c) Liquidity risk

 

not enough liquidity to pay due liabilities

 

constant monitoring of liquidity, liquidity reserves and unused credit lines

The Board of Directors bears ultimate responsibility for financial risk management. The Board of Directors has tasked the Audit Committee with monitoring the development and implementation of the risk management principles. The Audit Committee reports regularly to the Board of Directors on this matter.

The risk management principles are geared to identifying and analyzing the risks to which the Corporation is exposed and to establishing the appropriate control mechanisms. The principles of risk management and the processes applied are regularly reviewed, taking due regard of changes in the market and in the Corporation’s activities. The ultimate goal is to develop controls, based on the existing training and management guidelines and processes, that ensure a disciplined and conscious approach to risks. The Audit Committee is supported by the Head of Finance & Controlling in this task.

Owing to its business activities, GF is exposed to various financial risks such as credit risk, market risk (including currency risk, interest rate risk, and price risk), and liquidity risk. The following sections provide an overview of the extent of the individual risks as well as the goals, principles, and processes employed for measuring, monitoring, and hedging the financial risks.

Credit risk

The maximum credit risk as of the balance sheet date was as follows:

CHF million

 

2017

 

2016

 

 

 

 

 

Trade accounts receivable

 

754

 

666

Cash and cash equivalents

 

624

 

571

Other accounts receivable 1

 

31

 

23

Accrued income

 

16

 

21

Other financial assets 2

 

12

 

8

Derivative financial instruments

 

5

 

4

Total

 

1’442

 

1’293

1 Without tax credits.

2 Relates to loans to third parties, security deposit and long-term invested securities for the settlement of pension liabilities.

GF invests its cash worldwide and predominantly as deposits in leading Swiss and German banks with at least a BBB– rating. In accordance with the investment policy of GF, these transactions are entered into only with creditworthy commercial institutions. Generally, the investments have a maturity of less than three months. In addition, Corporate Companies have current bank accounts. Cash is allocated to several banks to limit counterparty risk. The maximum amount per bank is defined in relation to the ratings of the respective banks. 

Transactions involving derivative financial instruments are also entered into only with major counterparties with at least a BBB– rating. The purpose of such transactions is to hedge against currency risks and price fluctuations for the purchase of raw materials and electric power for the Corporation.

The danger of cluster risks on trade accounts receivable is limited due to the large number and wide geographic spread of customers. The extent of the credit risk is determined mainly by the individual characteristics of each customer. Assessment of this risk involves a review of a customer’s creditworthiness based on its financial situation and past experience. In monitoring default risk, customers are classified according to relevant factors, such as geographic location, sector, and past financial difficulties.

The maximum credit risk on financial instruments corresponds to the carrying amounts of the relevant financial assets. GF has not entered into appreciable guarantees or similar obligations that would increase the risk over and above the carrying amounts.

Currency risk

Foreign exchange rates

 

 

 

Average rates

 

Spot rates

CHF

 

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

1

AED

 

0.268

 

0.268

 

0.265

 

0.277

1

ARS

 

0.060

 

0.067

 

0.052

 

0.064

1

AUD

 

0.755

 

0.733

 

0.763

 

0.736

1

BRL

 

0.309

 

0.284

 

0.295

 

0.313

1

CAD

 

0.759

 

0.743

 

0.778

 

0.757

1

CNY

 

0.146

 

0.148

 

0.150

 

0.147

1

EUR

 

1.112

 

1.090

 

1.170

 

1.074

1

GBP

 

1.268

 

1.335

 

1.319

 

1.254

1

HKD

 

0.126

 

0.127

 

0.125

 

0.131

1

INR

 

0.015

 

0.015

 

0.015

 

0.015

1

MXN

 

0.052

 

0.053

 

0.050

 

0.049

1

MYR

 

0.229

 

0.238

 

0.241

 

0.227

1

NZD

 

0.700

 

0.687

 

0.695

 

0.708

1

RON

 

0.251

 

 

0.251

 

1

SGD

 

0.713

 

0.713

 

0.730

 

0.705

1

TRY

 

0.270

 

0.327

 

0.257

 

0.290

1

USD

 

0.985

 

0.985

 

0.976

 

1.019

100

CZK

 

4.227

 

4.032

 

4.583

 

3.974

100

DKK

 

14.944

 

14.639

 

15.718

 

14.445

100

JPY

 

0.878

 

0.907

 

0.867

 

0.870

100

KRW

 

0.087

 

0.085

 

0.092

 

0.085

100

NOK

 

11.920

 

11.724

 

11.892

 

11.819

100

PLN

 

26.122

 

24.975

 

28.015

 

24.350

100

SEK

 

11.537

 

11.518

 

11.888

 

11.242

100

THB

 

2.903

 

2.791

 

2.991

 

2.847

100

TWD

 

3.236

 

3.056

 

3.293

 

3.143

The table below shows the contract values and market values of the foreign exchange contracts (net) as of the balance sheet date:

CHF million

 

Fair value hedges

 

Cash flow hedges

 

2017

 

2016

 

 

 

 

 

 

 

 

 

Contract value

 

362

 

112

 

474

 

367

Replacement value 1

 

–3

 

1

 

–2

 

4

Market value

 

359

 

113

 

472

 

371

1 Corresponds to the carrying amount recognized as marketable securities or other liabilities.

Owing to its international activities, GF is exposed to currency risks. These financial risks occur in connection with transactions (in particular the purchase and sale of goods) which are effected in currencies different from the functional currency of the company in question. Such transactions are effected mainly in euros and US dollars. Currency risks can be reduced by purchasing and producing goods in the functional currency (“congruency” rule). In some cases, the remaining currency risks are hedged, generally for a maximum of twelve months, by means of forward exchange contracts.

The fair value hedges include foreign exchange contracts that serve to hedge loans to Corporate Companies in foreign currencies. Unrealized gains and losses from changes to the fair value are reported for these contracts in the financial result. The fair value hedges also include foreign exchange contracts that serve to hedge currency risks on receivables and liabilities. Like the currency effects on the underlying balance sheet item, gains and losses from changes to the fair value of these contracts are recognized in “Other operating income”.

The cash flow hedges mainly serve to hedge currency risks on future sales in foreign currencies. The volume of the foreign exchange contracts is limited to a maximum 75% of the expected sales. This results in a fully effective hedge. In individual cases, a higher ratio of the cash flows is hedged, e.g. for certain orders. Unrealized gains and losses from changes to the fair value are recognized directly in equity. They are transferred to the income statement when the service is performed and invoiced; as a result, the foreign exchange contracts become fair value hedges. To a lesser extent, currency risks with respect to future inventory purchases were also hedged during the reporting period.

The fair value hedges cover not only US dollar contracts but also contracts for the euro, the Turkish lira, the British pound, and the other currencies. All open foreign exchange contracts fall due and have an effect on liquidity and the income statement within twelve months of the balance sheet date. Assuming unchanged exchange rates, a cash outflow of CHF 472 million (gross) would be offset by a cash inflow of CHF 474 million (gross), giving a positive replacement value of CHF 2 million. Cash flow hedges account for cash outflows of CHF 113 million and cash inflows of CHF 112 million.

Contract values, net by currencies

CHF million

 

2017

 

2016

 

 

 

 

 

USD/CHF

 

330

 

299

EUR/CHF

 

81

 

2

TRY/USD

 

10

 

11

GBP/EUR

 

10

 

3

CNY/USD

 

9

 

4

USD/SEK

 

7

 

8

SEK/CHF

 

7

 

7

GBP/CHF

 

7

 

2

JPY/CHF

 

6

 

7

SGD/CHF

 

4

 

12

CNY/CHF

 

 

 

9

Other

 

3

 

3

Total

 

474

 

367

Accounting principles

Derivative financial instruments used to hedge such balance sheet items are stated at fair value. In hedging contractually agreed future cash flows (hedge accounting), the effective portion of changes in the derivative financial instruments’ fair value is recognized in equity with no effect on the income statement. Any ineffective portion is recognized immediately in the income statement. As soon as an asset or liability results from the hedged underlying transaction, the gains and losses previously recognized in equity are derecognized and transferred to the income statement along with the valuation effect from the hedged underlying transaction.

Interest rate risk

The interest rate risk may involve either changes in future interest payments owing to fluctuations in market interest rates or the risk of a change in market value, i.e. the risk that the market value of a financial instrument will change owing to fluctuations in market interest rates.

Market value sensitivity analysis for interest-bearing financial instruments with a fixed interest rate: Market value fluctuations of fixed-interest financial instruments are not recognized in the Corporation’s income statement. Therefore, a change in interest rates would not have any effect on the income statement. Hedge accounting was not applied for interest rate hedging.

Cash flow sensitivity analysis for financial instruments with variable interest rates: A one-percentage-point increase in interest rates would have increased net income by CHF 5.0 million (previous year: CHF 4.4 million). A reduction in the interest rate by the same percentage would have reduced net income by the same amount. The underlying assumption for this analysis is that all other variables remain unchanged.

Price risk

The securities held for trading of CHF 4 million are exposed to price risks (on the stock market). Since the value of the securities held for trading is modest, there is no great sensitivity to changes in share prices. The securities held are mainly shares of Swiss blue chip companies.

Liquidity risk

The following table shows the contractual maturities (including interest rates) of the financial liabilities held by GF:

CHF million

 

Carrying amount

 

Contractual cash flows

 

Up to 1 year

 

1 to 5 years

 

More than 5 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts payable

 

593

 

593

 

593

 

 

 

 

Bonds

 

524

 

564

 

158

 

173

 

233

Other financial liabilities

 

264

 

289

 

157

 

109

 

23

Accrued liabilities and deferred income

 

258

 

258

 

258

 

 

 

 

Other liabilities current/non-current 1

 

107

 

107

 

69

 

32

 

6

Total

 

1’746

 

1’811

 

1’235

 

314

 

262

1 For more details, see note 2.3 (2.3.1 Other liabilities).

The liquidity risk is the risk that GF is unable to meet its obligations when they fall due.

Liquidity is constantly monitored to ensure that it is adequate. Liquidity reserves are held in order to offset the usual fluctuations in requirements. At the same time, the Corporation has unused credit lines in case more serious fluctuations occur. The total amount of unused credit lines as of 31 December 2017 was CHF 577 million. The credit lines are spread over several banks so that there is no excessive dependence on any one institution.